Debates on Free Markets in Afghanistan

02.07.2006

Afghanistan is not interested in having a free market economy, because…its too poor to have it?  This is the message relayed by some economists in the country:

Independent economists, referring to the country’s horrible economic indices over the last two years, argue the free market system is not in the interest of a poor nation like Afghanistan.

With the approval of its new constitution two years back, the conflict-torn Central Asian country formally adopted the free market system, but analysts view the choice as incompatible with the ground realities in the given circumstances. Some experts are deadest against the Karzai administration’s ongoing privatisation programme which, they insist, amounts to selling the family silver. A cabinet meeting last year approved the privatisation policy, urging the government to transfer ownership of government-run corporations to the private sector.

Here is what they say:

Dr Syed Mohammad Mangal, chairman of Kabul University‘s Economics Department, favours a command economy with the government is firmly in control of every sector.  Professor Mangal stressed government control over the economy, which would slip into chaos if the nascent private sector is given a crucial role at this point in time. Afghanistan‘s economy was still in a rudimentary phase, he reiterated, where a free-market system could not yield the desired results.

Sher Ali Tarzai of Afghanistan‘s Academy of Sciences in Kabul said a free-market economy did not suit the country because most Afghans were too poor to purchase houses, much less set up businesses. “The regime envisaged in our basic law is against the interests of the masses in that the country still lacks infrastructure and other essential facilities,” observed Tarzai.

Another economist, Haji Hafiz Khan believed the system would eventually concentrate all economic benefits in a specific group of moneyed people. He suggested the government should commission a survey on which system could be most beneficial for the Afghans in the obtaining conditions.

I see fundamental conflicts in statements made by some of these economists and the private sector in Afghanistan, of course, could not disagree with them more:

But Hamiudullah Farooqi, chief executive of Afghanistan‘s International Chamber of Commerce, supported the sell-off of feckless government-run corporations making losses or doing no tangible good to the people. The experience of the last six decades showed the government had failed to efficiently run the public-sector organisations, insisted Frooqi, who claimed most of the 173 state-controlled entities were expensive white elephants.

CIPE has supported the creation of the Afghanistan International Chamber of Commerce (AICC) and continues to work with the chamber on a number of private sector development projects.  In its first month, CIPE assisted AICC in the development of a membership campaign that netted nearly 2,000 dues-paying members.  Since then, AICC implemented a number of initiatives such as providing training for business associations and chambers, organizing policy roundtables, and establishing a center to provide assistance to companies in procurement process.

Although I may disagree with where the aforementioned economists lead with their statements on the need for government command-style control of the economy, I do admit that they, nonetheless, make a rather valid point.  Market economies require solid, clear rules and regulations and in Afghanistan today there seems to be a lack of those.  This should not be a reason for disappointment, however.  Rather than postulating a command economy, efforts should be channeled into improving the regulatory environment so that Afghans can put their entrepreneurial spirit to work.  People in Afghanistan are not too poor to set up a business, as Sher Ali Tarzai contends.  Otherwise, what do you call 2,000 members who joined AICC in the first 3 days and thousands of others who run their small businesses on city streets?  They are entrepreneurs.  But those entrepreneurs do run into a lof of difficulties in starting and running a business.  Organizations like the AICC help reform the country’s institutions and set up a framework for private sector growth.  I choose this alternative over having a command economy.  I am sure people of Afghanistan do the same.